I could have told you 6 maybe 7 years ago this subprime mess was coming. Any fool could look around and tell there weren't enough 6 figure salaried jobs around to pay for all those 6 figure plus homes being built. Everywhere you looked there were people, driving BMWs, rolling into gated communities with homes starting at $500,000.00, you knew it couldn't last.
Those were the headlines because they effected big money. Subprime crisis! Talk of bailouts and stimulus packages filled the air. You envisioned high rollers jumping out of windows and mortgage company closing, white collar crime and scandals everywhere. But the true scandal of banking deregulation isn't even reported, but that maybe because it only effects the 12% who are living at or below poverty.
A story published today, in the Wall Street Journal of all places, illustrates what this blog entry is about.
DOTHAN, Ala. -- One recent morning, dozens of elderly and disabled people, some propped on walkers and canes, gathered at Small Loans Inc. Many had borrowed money from Small Loans and turned over their Social Security benefits to pay back the high-interest lender. Now they were waiting for their "allowance" -- their monthly check, minus Small Loans' cut.
http://online.wsj.com/...
I can't drive to my local grocery store but what I don't pass at least one of these check cashing business. They have sprang up like weeds everywhere. It wasn't until this past year that I realized just what a trap they set for you. The people in the Wall Street Journal article were on a fixed income. I was lucky I had a job.
To give you some insight into my story. I had been laid off from my current job awaiting a transfer. Due to a bungling unemployment compensation office my Unemployment checks came sporadically. During that time we were hit with some massive utility bills due to a rate increase. I was referred to several faith based agencies, to help pay them, only to be told they were out of money till the first of the month. This being the first week of the month the utility companies weren't about to wait till the agency received new fund so we were forced to get a check loan to keep our utilities on.
I was off for three months and since the agencies don't check to see if you have any other check loans, we used them as emergency back up when we needed funds. Getting a loan from different agencies paying the interest and renewing the checks, they make it so easy. When I finally returned to work I received a nice raise of $400.00 a month. The problem was I was paying $600.00 in check loan fees a month, not counting the principle which by the way never goes down. It's a Merry Go Round they get you on and then look you in the eye and say "well you did it voluntarily". As I said I have been lucky. I have a job and am digging myself out of this hole. This entry isn't for me, it's for all those less fortunate, that these loan sharks are bleeding dry. Be aware this other America is out here and know what is happening to them. You want to stimulate someone stimulate them!
I want to leave you with this video...
http://link.brightcove.com/...
and just one of the compelling story's from the article;
With direct deposit, Social Security recipients could now more easily pledge their future checks as collateral for small short-term loans. Oliver Hummel, a Billings, Mont., resident with schizophrenia, lived on the $1,013 a month in Social Security disability benefits he received by direct deposit to his bank account. Early last year, after his car broke down and his 13-year-old terrier racked up a big vet bill, Mr. Hummel borrowed $200 from a local lender.
Like many payday borrowers, Mr. Hummel realized he couldn't pay off the loan when it was due so he went to another "payday" lender. Lenders rarely ask about other loans and debt, and borrowers often take out multiple loans in an effort to avoid defaulting. By February, Mr. Hummel had eight loans from eight lenders, at effective annual interest rates that ranged from 180% to 406%.